Electronic Contract Manufacture (ECM) Sector Message Board

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Strategies & Market Trends : Electronic Contract Manufacture (ECM) Sector

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To: Adelantado who wrote (74)	3/4/1997 8:44:00 PM
From: kolo55	of 2542

I am not getting a forward PE of 4, or even 8 for SGMA. Don't get me wrong, I just thought this stock was way overpriced at the 24+ level it was at last week. Today's news: National Securities Corp analyst Steven Kornfeld said he reiterated a buy recommendation on SIGMATRON INTERNATIONAL INC, saying a drop in the shares on Monday "offers investors a bargain for this growing electronic contract manufacturer." Kornfled said shares dropped "as momentum traders pummeled the stock." He added that the company is expected to report fiscal 3Q earnings on March 10 and no major surprises are expected. "We expect that 3Q results for (Sigmatron) will approach last year's EPS (earnings per share) of 26 cents falling slightly short of our original 27-cent EPS estimate," Kornfeld said in a report. He added that the company is expected to achieve National Securities' earnings per share estimate of $1.17 a share in fiscal 1997 and $1.57 in fiscal 1998. (Reuters 02:37 PM ET 03/04/97) So I'm getting a forward PE for SGMA of 12 and a fiscal 98 PE= 9 when the stock is at 14. Given the strong dependence of this company on one customer whose product is coming under fire as a worthless piece of junk (CO detector), I think the risk in this stock is sizable. Sigmatron's management has warned repeatedly about this dependence and the seasonal nature of their business. Of course, SGMA's management is quite competant and is diversifying rapidly. If I had to buy a stock in this region (Illinois), I might buy the board maker Circuit Systems (CSYI) who owns 20% of Sigmatron, and is buying back their own shares with excess cash flow. Circuit Systems has a tiny market cap of about $27M. They are capable of earning 55-60 cents a share for the next twelve months and the stock is trading at about 5 1/4. Paul

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